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FOREST MANAGEMENT WORKSHOP MANUAL

TAX EXAMPLE


First Year -  Buy 1,000 acres of land for $190,000 including purchasing
              costs

              Assign basis land 1,000 acres                    $130,000
              Assign basis timber 2,000 mbf                      60,000 
                                                               _________
                                           Total               $190,000


Second Year - Sell timber 1,500 mbf                            $ 75,000
              Less cost basis                                     4,500
                                                               _________
              (If held over 12 months)     Captil Gains        $ 30,000


              1/2 Capital Gain or taxable                      $ 15,000
              Plus FIP cost-share payment                         1,200
                                                               _________
                                           Gross Income        $ 16,200

              Less Deductions:

              Depriation on $20,000 dozier purchased           $  2,000
               (10 year-life)
              Interest paid on money owed (31,579 x 9.5%)         3,000
              Labor hired for timber stand improvement            1,600
              Property taxes ($0.50 per $100 assessment)            950
                                                               _________
                                           Total Deductions    $  7,550

              Taxable Income $16,200 - $7,550 =                $  8,650

                at 25% tax rate, tax =                         $  2,162
                less 10% investment credit on dozier              2,000
                                                               _________
                                           Taxes Due           $    162


Tenth Year -  Sell land and timber                             $200,000
              Less basis land                                   130,000
              Less adjusted basis timber                        150,000
              Less selling fees                                  12,000
                                                               _________
                                           Gross Income        $ 50,000

               At 30% tax rate, tax due is                     $  7,155


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Last revised September 3, 1995.

Please send comments to: Duane Bristow (72711.1414@compuserve.com)